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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Which of the following transactions would not result in an entry to the inventory account in the buyer’s accounting records under a perpetual inventory system?

a. Purchase of merchandise on credit

b. Return of merchandise to the supplier

c. Payment of a credit purchase of merchandise within the discount period

d. Payment of freight by the seller for goods received from a supplier

To determine

Concept introduction:

Perpetual Inventory System:

The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.

LIFO method:

LIFO Stands for Last in First Out. Under this method, the latest units purchased are assumed to be sold first and cost of goods sold is calculated accordingly. The ending inventory in the method includes the oldest units purchased.

To choose:

The transaction that would not result in an entry to the inventory account if the buyer uses perpetual inventory system.

Explanation

Explanation for Correct answer:

d. Payment of freight by the seller for goods received from a supplier would not result in entry of inventory account by the buyer because it does not affect the inventory account.

Hence this is the correct option.

Explanation for incorrect answers:

a. Purchase of merchandise on credit is debited to the inventory account...

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